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DISSENTING STATEMENT OF
COMMISSIONER HAROLD FURCHTGOTT-ROTH
Re: BellSouth Corporation, Order, EB Docket No. EB-00-IH-
0134, Acct. No. X32080035.
I cannot approve of the consent decree that the
Commission adopts today. The Commission's assertion of
jurisdiction over this matter sets this agency on a course
that is completely at odds with the framework that Congress
intended for local exchange carriers to use to reach
agreements regarding the terms on which competing carriers
will use incumbents' networks. Moreover, the agency has
predicated its investigation of this matter on a one-sided
set of facts, where the complaining party did not bother to
file any sort of formal complaint, either here or at a state
commission. As far as I can tell, the Commission has
browbeaten BellSouth into paying a $750,000 fine and
agreeing to a number of conditions simply for proposing to
include two terms that the agency thinks questionable in a
non-disclosure agreement. I therefore dissent from this
decision, and I regret that BellSouth found it necessary to
negotiate this decree with the Enforcement Bureau.
Background. Nearly two years ago, Covad and BellSouth
voluntarily negotiated a third amendment to their existing
interconnection agreement, which applied to several states
in BellSouth's territory. The effective date of that
amendment was December 1, 1998, and the term was for two
years.1 In this contract, the parties agreed to temporary
prices for certain network elements that BellSouth would
provide. At Covad's request, the parties agreed that prices
for BellSouth's network elements would be ```trued-up (up or
down) based on final prices either determined by further
agreement or by final order, including any appeals, in a
proceeding involving BellSouth before the regulatory
authority for the state in which the services are being
performed or any other body having jurisdiction over this
agreement, including the Federal Communications
The December 1998 agreement did not cover the terms
under which BellSouth would provide unbundled copper loops
to Covad. In the spring of 1999, the parties embarked on
negotiating an amendment to their agreement regarding this
network element, and this consent decree is the result of a
dispute that arose during those negotiations.
BellSouth proposed an amendment that, among many other
things, set the rates at which it would provide its
unbundled loops to Covad. Covad objected to these rates and
asked BellSouth for cost studies to show that the rates
conformed with the Commission's pricing rules.3 BellSouth
contended that these data were confidential and asked Covad
to sign a nondisclosure agreement before BellSouth disclosed
the information to Covad.4
The draft nondisclosure agreement proposed by BellSouth
provided that BellSouth's ``Confidential Information'' would
not be ``revealed or distributed'' to anyone other than
Covad's ``Authorized Representatives.'' Paragraph 7 of the
draft agreement provided that ``[i]n the event [Covad] is
required by law, regulation, or court order to disclose any
of [BellSouth's] Confidential Information, [Covad] will
promptly notify [BellSouth] in writing prior to making any
such disclosure in order to facilitate [BellSouth] seeking a
protective order or other appropriate remedy from the proper
authority.'' In addition, Paragraph 5 provided that both
parties were to treat the negotiations regarding Covad's
purchase of unbundled network elements as confidential and
specified that ``the discussions and conversations within
the context of Negotiations are inadmissible in any
proceeding conducted before a state or federal regulatory,
judicial or administrative agency.''
In early September 1999, Covad asked BellSouth to
delete Paragraph 5 of the non-disclosure agreement. It did
not say anything about Paragraph 7. On September 14, 1999,
BellSouth responded that it was unwilling entirely to delete
Paragraph 5. BellSouth's representative told Covad that if
it ``would like to propose different language, I would be
happy to present it to our legal folks for
On September 30, 1999, Covad signed the amendment to
the December 1998 interconnection agreement, but declared it
did so ``under protest.'' It asserted that it believed the
``prices imposed by BellSouth are both unreasonable and
contrary to federal pricing rules.''6 BellSouth responded
on October 1, 1999, in a letter stating that BellSouth
thought the issue regarding the rates for the unbundled
copper loop had been resolved through previous discussions.
BellSouth pointed out that the rates would be subject to
``true-up'' based on final prices determined by further
agreement or by a regulator's order. BellSouth also stated
that it had offered to allow Covad to review the underlying
cost studies, but that Covad had not yet signed a
In a letter dated October 4, 1999, Covad again took
issue with BellSouth's proposed nondisclosure agreement.
Paragraph 5, wrote Covad's representative, ``precludes Covad
from disclosing any information regarding the entire
negotiation to `a state or federal regulatory, judicial or
administrative agency.''' 8 Covad asserted that BellSouth
had violated its duty to negotiate in good faith, both by
initially refusing to disclose cost information and by
subsequently conditioning disclosure of its cost information
upon the execution of a nondisclosure agreement that covered
the entire negotiation. Covad asked BellSouth to reconsider
the terms under which it would provide cost information
regarding the unbundled copper loop.
On October 13, 1999, BellSouth acknowledged that it had
asked Covad to execute a nondisclosure agreement before
reviewing the studies. But it disagreed with Covad's
reading of the proposed agreement. ``The non-disclosure
agreement (NDA) proposed by BellSouth would not have
precluded Covad from providing the information contained
therein in the event that it were required to do so by an
order of the FCC or state commission. Paragraph seven (7)
of the proposed agreement simply required Covad to notify
BellSouth so that BellSouth could seek a protective order or
obtain an order that ensured that the confidential
information was accorded proprietary treatment.''9 In
addition, BellSouth contended that, in Paragraph 5 of the
agreement, it merely sought to keep confidential the
discussions and conversations held during the negotiations,
in the same way that the rules of evidence make settlement
discussions inadmissible in litigation. ``If Covad wishes
to introduce cost studies into arbitration, it can certainly
seek to do so, subject to appropriate objections and
requests for proprietary treatment.''10
According to an ex parte pleading that BellSouth has
submitted, representatives of BellSouth and Covad met on
October 14, 1999.11 According to BellSouth, Covad's
representatives indicated that they were unwilling to
execute a nondisclosure agreement, and BellSouth proposed to
permit Covad to review the cost studies for two hours on
October 20, 1999. BellSouth's pleading states that Covad's
representative agreed to this proposal.
Covad again expressed its unhappiness with the
nondisclosure agreement proposed by BellSouth, stating in an
October 16, 1999 email that it was ``troubled by BellSouth's
insistence upon keeping ALL negotiations regarding the
[unbundled copper loop] Amendment confidential . . . when
BellSouth only contends that the cost studies alone are
confidential. . . . [W]e cannot agree to keep other aspects
of these negotiations (i.e., our recent letters)
confidential, when neither party contends these portions of
the negotiations contain confidential information.''
Covad's representative went on to say that he had already
disclosed portions of the negotiations to entities outside
of Covad, and that it was therefore impossible for Covad to
comply with Paragraph 5 of the proposed NDA. Covad proposed
to substitute Rule 408 of the Federal Rules of Evidence for
Paragraph 5.12 In an October 22, 1999 letter Covad insisted
that it needed ``unfettered access to all cost information''
on which BellSouth's rates were based,13 and on November 4,
1999, Covad declared that BellSouth's proposal to disclose
the cost information in a two-hour meeting at BellSouth's
offices was ``entirely unacceptable.''14
On November 16, 1999, BellSouth responded to these
complaints. Its letter states that Tom Allen of Covad had
``previously agreed to come to BellSouth to examine the cost
data'' in question, but that ``[a]pparently Covad has now
changed its position.''15 It went on to offer to provide
the cost study to Covad to review pursuant to section 9 of
the companies' existing interconnection agreement.16
BellSouth asked Covad to return the cost data to it within
Covad rejected this offer on December 2, 1999. It
argued that although this offer was better than what had
been previously proposed, ``it still prevents Covad from
effectively using the information in negotiations with
BellSouth.'' ``To arbitrarily limit Covad's access to the
cost information for thirty days when the negotiations will
likely last beyond that period creates an improper disparity
in bargaining power that favors BellSouth.''17 Covad
demanded that BellSouth deliver the cost information to it
no later than December 8, 1999, asserting that any failure
to do so would violate BellSouth's duty to negotiate in good
faith. And on January 28, 2000, Covad sent a follow-up
letter that it said served as ``another formal request from
Covad for unfettered access to the . . . cost studies.''18
To date, Covad has declined to sign a non-disclosure
agreement, and BellSouth has not provided Covad with the
disputed cost information.
Sometime last spring, Covad apparently informally
contacted the Enforcement Bureau and alleged that BellSouth
had violated its duty of good faith negotiation in the
course of these negotiations. Covad did not file any formal
complaint with this Commission, nor did it ever formally
raise this issue before a state commission. An
investigation ensued, and this consent decree is the result.
The Commission Lacks Jurisdiction to Enter Into this
Consent Decree. Section 251(c)(1) requires both incumbent
and competing local exchange carriers to negotiate in good
faith the terms of interconnection agreements. Section 252
sets out a detailed framework that carriers are to use to
reach such agreements. Carriers may first attempt
voluntarily to reach agreement, without regard to the
standards set out in section 251(b) and (c). 47 U.S.C.
§ 252(a)(1). If a party is dissatisfied with any aspect of
these voluntary negotiations, it may petition a state
commission to resolve outstanding issues. Id. § 252(b)(2).
Parties may ask a federal district court to determine
whether a state commission's decision meets the requirements
of sections 251 and 252.
The Commission here assumes, without discussion, that
it has independent jurisdiction to enforce BellSouth's
section 251 obligations. In other words, it thinks that it
may review BellSouth's conduct in voluntary negotiations to
determine whether there has been a violation of BellSouth's
section 251 duties, including its duty to negotiate in good
faith. I disagree. The statutory framework that Congress
devised contemplates that parties will resolve whatever
differences they may have through the section 252 process.
Thus, if either Covad or BellSouth were displeased with the
course that their voluntary negotiations had taken, the
statute directs them to take the dispute to a state
commission and from there to a federal district court.
The Commission here effectively bypasses this process.
In my view, its assertion of jurisdiction is not supported
by the statute, and the practical effect of its action will
be to undermine the section 252 negotiation process.
Significantly, the only court that has thus far considered
the issue on the merits has determined the Commission's view
of its authority independently to enforce section 251 is
``contradicted by the language, structure, and design of the
Act.'' See Iowa Utils. Bd. v. FCC, 120 F.3d 753, 804 (8th
Cir. 1997). Although the Supreme Court reversed this
determination on ripeness grounds, see AT&T v. Iowa Utils.
Bd., 119 S. Ct. 721, 733 (1999), I believe that the Eighth
Circuit's understanding of the Commission's role in the
section 251 and 252 process is the correct one, and I regret
that no party has brought this issue before a court. If a
party may sidestep the section 252 arbitration process
simply by notifying the Commission that it believes another
party has violated section 251, the process through which
parties are intended to reach agreement will be gravely
The Evidence on Which this Action Is Predicated Is
Exceedingly Slim. Even if the Commission had jurisdiction
over this matter, however, I could not join in this
decision. The Commission here apparently has taken action
based on BellSouth's proposal to include two paragraphs
regarding confidentiality in a draft of a nondisclosure
agreement.19 I would be very reluctant to conclude that
this conduct, without more, constituted a failure to act in
good faith under section 251.
In its Local Competition Order, the Commission
considered section 251's good faith requirements. It ruled
that whether a party has acted in good faith will typically
require a case-by-case determination, in light of all the
facts and circumstances underlying the negotiations.20 The
Commission specifically considered the matter of non-
disclosure agreements. It noted that there are ``pro-
competitive reasons for parties to enter into a
nondisclosure agreements,'' although it also concluded that
agreements should not preclude a party from providing
information requested by the Commission, a state commission,
or in support of a request for arbitration under section
252(b)(2)(B).21 The Commission also observed that a party
might voluntarily agree to limit its legal rights or
remedies as part of a negotiated agreement.22
The Commission here appears to have lost sight of the
fact that section 252(a)(1) authorizes parties to negotiate
binding agreements ``without regard to the standards'' set
forth in section 251(b) and (c).23 Surely this language
means that parties should be free at least to propose
virtually any language they choose regarding interconnection
agreements, including the extent to which shared information
will be kept confidential. BellSouth did no more than that
here. It merely proposed boilerplate language regarding
confidentiality of cost data, and its subsequent
correspondence with Covad indicates that it was open to
modifying the language of these paragraphs. To be sure, the
Local Competition Order ruled that agreements should not
prevent the disclosure of information to regulatory
authorities, but I do not understand BellSouth's proposed
language to run afoul of this requirement. To the extent
there was any ambiguity on this point, BellSouth's October
13 letter made utterly clear that it did not intend either
Paragraph 5 or Paragraph 7 to preclude Covad from
introducing cost information in an arbitration proceeding.
In addition, the record indicates that Covad's conduct
was not entirely irreproachable. It appears to have
declined to negotiate regarding alternative language,
despite BellSouth's request that it propose modifications.
Indeed, Covad insisted several times on ``unfettered
access'' to the cost information - a demand that is clearly
inconsistent with the Local Competition Order's recognition
that an incumbent carrier may have legitimate reasons for
keeping cost information confidential.
Moreover, it is very troubling that the Commission here
has not acted on a formal complaint, but instead undertook
this investigation on its own motion. And it is telling
that - even after November 16, 1999, when BellSouth agreed
to make the information available to Covad on terms that
even the Enforcement Bureau evidently thinks were acceptable
- Covad continued to decline to review the data. Nor do I
understand why, if Covad was so unhappy with the course that
voluntary negotiations had taken, it failed to ask a state
commission to resolve the matter. If Covad did not think
itself sufficiently harmed by BellSouth's conduct to warrant
filing a formal pleading, ask for state commission
arbitration, or even to review the data at issue when it was
made available, I cannot comprehend why the Enforcement
Bureau thought it appropriate to initiate this proceeding.
* * * *
The Commission had no jurisdiction to undertake this
enforcement proceeding. And even assuming it had some
authority to adopt this consent decree, the set of facts on
which it chose to base this enforcement action is
exceedingly troubling. If a company can be exposed to this
level of liability simply by proposing terms to be included
in an interconnection or confidentiality agreement, I see no
reason why it should risk voluntarily negotiating at all. I
therefore dissent from the Commission's adoption of this
1 See Affidavit of Brian T. Campbell, BellSouth Manager-
Interconnection Service/Pricing (Mar. 9, 2000).
2 See Third Amendment to Interconnection Agreement between
Covad and BellSouth, ¶ 6.0 (Dec. 1, 1998).
4 See Letter from Brian T. Campbell to Christopher
Goodpastor (Sept. 2, 1999).
5 See Email from Brian T. Campbell to Christopher Goodpastor
(Sept. 14, 1999).
6 See Letter from Dhruv Khanna, Covad Executive Vice-
President/General Counsel, to Harris Anthony, General
Counsel, BellSouth Interconnection Services (Sept. 30,
8 See Letter from Christopher Goodpastor to Brian Campbell
(Oct. 4, 1999).
9 See Letter from Brian T. Campbell to Christopher
Goodpastor (Oct. 13, 1999).
11 See Response of BellSouth to Enforcement Bureau Possible
Notice of Apparent Liability.
12 See Email from Christopher Goodpastor to Brian T.
Campbell (Oct. 16, 1999).
13 See Letter from Christopher Goodpastor to Michelle
Culver, Negotiator, Interconnection Services, BellSouth
Interconnection Services (Oct. 22, 1999).
14 See Letter from Christopher Goodpastor to Brian T.
Campbell (Nov. 4, 1999).
15 See Letter from Brian T. Campbell to Christopher
Goodpastor (Nov. 16, 1999).
16 Section 9 of the parties' existing agreement provides for
the use of confidential information exchanged by the
companies. See Third Amendment to Interconnection Agreement
between Covad and BellSouth, § 9.0 (Dec. 1, 1998).
17 See Letter from Christopher Goodpastor to Brian T.
Campbell (Dec. 2, 1999).
18 See Letter from Tom Allen, Covad Vice President, ILEC
Relations to Jerry Hendrix, Senior Director, BellSouth
Interconnection Services (Jan. 28, 2000).
19 Consistent with an agreement between the Enforcement
Bureau and BellSouth, the Commission was barred by the
statute of limitations from taking any enforcement action
based on conduct that occurred prior to August 25, 1999.
See 47 U.S.C. § 503(b)(6).
20 Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, 11 FCC Rcd 15499, 15575
[¶ 150] (1997).
21 Id. [¶ 151].
22 Id. [¶ 152].
23 Since parties may voluntarily negotiate agreements that
depart from section 251's requirements, I do not understand
why, at this stage of negotiations, Covad asserted that
BellSouth was required to base rates for its unbundled loops